OM WELFARE SOCIETY,HISAR V. ACIT EXEMTPTION, HARYANA

ITA 5204/DEL/2025

AI Insights

The case involves OM Welfare Society, which appealed against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, which upheld the additions made by the Assessing Officer for the Assessment Year 2017-18. The additions were based on unexplained cash deposits during the demonetization period. The Tribunal examined whether these deposits represented undisclosed income. The Tribunal noted that the society, registered under sections 12AA and 80G of the Income Tax Act, was involved in educational activities and had declared all its receipts, including the contested cash deposits, in its tax returns. The Tribunal referenced several precedents, including decisions from the Supreme Court and various High Courts, which supported the view that income already disclosed in tax returns cannot be subjected to further taxation under Section 68 as unexplained cash credit.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840123 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2017-2018
• Appeal Filed On: 26-08-2025
• Other Referred Cases: Smt. Srilekha Banerjee and Others vs. CIT, DIT Vs. Keshav Social & Charitable Foundation, Shugan Chandra Kothari Trust Vs. CIT (Exemption), Fateh Chand Charitable Trust Vs. CIT (Exemptions), CIT v. Laxmi Pat Singhania, State of Uttar Pradesh vs. Raja Buland Sugar Co. Ltd., Shree Sanad Textiles Industries Ltd. Vs. DCIT, Bhagwant Merchants (P) Ltd. Vs. ITO, ITO vs. Shaik Zameer, Shri Ashok Desing naik vs. ITO, S.B. Steel Industries vs. CIT, J.M. Wire Inds Vs. CIT, DCIT Vs. Smt. Veena Awasthi, Neeta Breja
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUSH KALRA
• Assessee Lawyers: GAUTAM JAIN; LALIT MOHAN
• Keywords: Business income; Reasonable cause; Unexplained cash credit; Income from undisclosed sources; Principle of natural justice; Charitable institution
• Section: 143(3); 142(1); 12AA; 68; 12A; 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES ‘E’: NEW DELHI. BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER and SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No. 5204/ DEL/2025 (Assessment Year : 2017-18) OM Welfare Society Vs. ACIT Exemption 11th KM Stone, Village Juglan Haryana Chandigarh Road, Hisar 125001, Haryana (PAN: AAATO1903E) ASSESSEE BY : Sh. Gautam Jain, Adv & Sh. Lalit Mohan, CA REVENUE BY : Ms. Ankush Kalra, Sr. DR Date of Hearing : 08.01.2026 Date of Order : 25.02.2026 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. This appeal is filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to ‘ld. CIT(E)’) dated 16.04.2025 for AY 2017-18. Printed from counselvise.com 2 ITA No.5204/Del/2025 2. At the time of filing of appeal, the Registry has pointed out a defect that appeal is time barred by 57 days. 3. We have heard both the counsels on the issue of condonation of delay. In our considered opinion, there was a reasonable cause for the delay in filing the appeal. Therefore, we condone the delay in filing the appeal before the Tribunal. 4. Brief facts of the case are, assessee filed its return of income on 13.10.2017 declared NIL income. Assessee is a welfare society, 11th KM Stone, Village Juglan, Chandigarh Road, Hisar Haryana. The return filed by the assessee was processed u/s 143(1) of the Income Tax Act, 1961 (in short ‘Act’). The assessee revised its return of income on 23.09.2018 and the same was selected for scrutiny through CASS. Accordingly, notices under section 143(2) and 142(1) along with the detailed questionnaire were issued and served on the assessee. In response, assessee filed relevant information as called for. On perusal of the information submitted by the assessee, it is observed that assessee is a registered society u/s 12AA of the Act dated 26.11.2008 by the Commissioner of Income Tax, Hisar and granted exemption u/s 80G of the Act. Further approval u/s 10(23C)(vi) of the Act was also granted to the assessee by the CCIT, Haryana. 5. Assessee is imparting education and running a Technical and Management College and also a Senior Secondary School at Barwala Road, Hisar. The Printed from counselvise.com 3 ITA No.5204/Del/2025 Assessing Officer observed that assessee has declared gross receipts of Rs.19.88 crores and claimed expenditure of Rs.16.49 crores and declared surplus Rs.3.40 crores. 6. He observed that the case was selected for scrutiny through CASS for the reason that assessee has deposited huge cash during the demonetization period that is from 09.11.2016 to 31.12.2016, high refund claimed, sales turnover/receipts and business income of the Trust. After considering the detailed submission by the assessee, in response to notice u/s 142(1) and he observed that the assessee has deposited cash in its bank account during financial year 2015-16 and 2016-17 and the same was reproduced at page 3 and 4 of the assessment order, for the sake of brevity it is reproduced below: Printed from counselvise.com 4 ITA No.5204/Del/2025 7. Further, he observed that assessee has declared cash in hand as on 31.03.2016 is Rs.25,30,520/- and cash in hand as on 31.03.2017 is Rs.24,333/-. By referring to the above statement, the Assessing Officer observed that, there is sharp jump in cash deposits during the month of November 2016. In comparison to cash deposit during the earlier year in the month of November 2015 was only Rs.26,67,600/- whereas in the current year, assessee has deposited Rs.4,24,29,000/- in the month of November 2016 which is the month of demonetization. He observed that cash in hand as on 02.11.2016 as per the cash book was Rs.2,52,005.95/- and on 03.11.2016 the cash was Rs.2,13,670.95/- and about Rs.52,000/- as on 04.11.2016. After 04.11.2016, there is a sharp rise in the cash in hand by way of fee collection as shown by the assessee in the cash book and the cash in hand rose to Rs.4.25 crore as on 08.11.2016. 8. Further, he compared the cash deposits during October 2015 and October 2016 which was matching with the cash collection and cash deposit during the previous year. However, he observed that there is a sharp rise in cash deposits during the month of November 2016 which is according to him is Printed from counselvise.com 5 ITA No.5204/Del/2025 unbelievable and unjustified. He further observed that it is highly unbelievable that the students who used to pay fees in the month of January, February and March in the succeeding year, have paid their fees in the November itself. He further observed that assessee has accumulated the cash in hand after 05.11.2016 and not deposited the same in there bank account and surprisingly deposited the same during demonetization period. 9. After considering the explanations offered by the assessee, he observed that assessee has deposited cash from 10.11.2016 to 16.11.2016 to the extent of Rs.4,22,84,000/- the source declared was from cash in hand. Accordingly, by relying on decisions of Hon’ble Supreme Court in the case of Smt. Srilekha Banerjee and Others, he proceeded to make the addition u/s 68 of the Act r.w.s. 115BBE of the Act to the extent of Rs.4,22,84,000/- after giving credit to the cash in hand of Rs.2,27,000/-. 10. Aggrieved with the above order assessee preferred an appeal before NFAC, Delhi and filed a detailed submissions which includes details of fees collection during 2013-14 to 2017-18 in cash and other than the cash and total receipt as well as status of assessment proceedings as under:- Printed from counselvise.com 6 ITA No.5204/Del/2025 11. Further submitted that the source of cash is explained by the assessee as fees received from the students during the financial year 2016-17 more particularly during 01.11.2016 to 08.11.2016. Further it was submitted that fees received by the assessee are duly reflected in the cash book and are supported by documentary record mentioned in the ordinary course by the assessee. Further submitted that once there is no dispute as to courses running by the assessee and students pursuing the courses. The Assessing Officer has not brought out any material on record to disbelieve the evidence placed on record for making case against the assessee that cash deposited by the assessee represents income from undisclosed sources. If that be the case cash deposited by the assessee represents income from disclosed sources. 12. Further, it was submitted that assessee has submitted following evidences in support of its claim during assessment proceedings are as under:- i) Copy of detail of courses along with detail of no. of students pursuing courses during the year under consideration (pages 68-69 of Paper Book) ii) Copy of notice dated 7.10.2016 issued by appellant for deposit of fees (pages 70-72 of Paper Book) iii) Copy of detail of fees received in cash before period of demonetization (pages 64 of Paper Book) iv) Copy of detail of month-wise fees received in cash for the year under consideration (pages 65 of Paper Book) v) Copy of audited financial statement for following periods: a) financial year 2016-17 relevant to assessment year 2017-18 (pages 01-40 of Paper Book Printed from counselvise.com 7 ITA No.5204/Del/2025 vi) Copy of month-wise detail of cash deposit during year under consideration alongwith preceding assessment year ie 2016-17 (pages 67 of Paper Book) 13. Further, assessee objected to the addition made by the Assessing Officer invoking the provisions of Section 68 for the disclosed gross receipts/income of the assessee. In this regard, it has relied on the decisions of Hon’ble Delhi Delhi High Court in the case of DIT Vs. Keshav Social & Charitable Foundation reported in 278 ITR 152, and the reliance was placed on the following decisions of the Coordinate Benches in the cases of:- a) Shugan Chandra Kothari Trust Vs. CIT (Exemption) in 78 ITR (T) 340 (Del- Trib.) b) Fateh Chand Charitable Trust Vs. CIT (Exemptions) in 49 ITR (Trib) 276 (Lucknow) c) 72 ITR 291 (SC) CIT v. Laxmi Pat Singhania vs. CIT d) 118 ITR 50 (SC) State of Uttar Pradesh vs. Raja Buland Sugar Co. Ltd. e) ITΑ Νο. 995/Ahd./2014 dated 6.1.2020 Shree Sanad Textiles Industries Ltd. Vs. DCIT, f) ΙΤΑ 2614 Kol 2019 dated 29.5.2020 Bhagwant Merchants (P) Ltd. Vs. ITO g) ITA No. 1019/Hyd/2017 dated 18.5.2018 ITO vs. Shaik Zameer h) ITA No. 48/bang/ 2019 dated 27.2.2019 Shri Ashok Desing naik vs. ITO i) ITA No.1652/Ahd/2011 Shri Pavan Kumar Bhagatram j) ITA No.264/Hyd/2011 S.B. Steel Industries k) J.M. Wire Inds Vs. CIT in ITA 96 of 1989 dated 15.07.2010 l) ITA No.215/LKW/2016 dated 30.11.2018 DCIT Vs. Smt. Veena Awasthi m) ITA No.524/D/2017 dated 25.11.2019 Neeta Breja 14. Further, it was submitted that the assessee has deposited fees during the assessment year 2016-17 to the extent of Rs.13,33,45,600/- and in the assessment year 2017-18 assessee has deposited Rs.11,58,28,800/-, during Printed from counselvise.com 8 ITA No.5204/Del/2025 the year under consideration. There is substantial decrease in the cash deposited by the assessee compared to previous assessment year. Further, assessee has filed details of cash receipts and through bank in three assessment years. For the sake of brevity it is reproduced below:- 15. It was submitted that the assessee has disclosed the gross receipts in their return of income and the same cannot be added to the income of the assessee as undisclosed u/s 68 of the Act. After considering the detailed submissions, Ld. CIT(E) sustained the additions made by the Assessing Officer relying on the decision of Lalchand Bhagat Ambica Ram Vs. CIT 37ITR 288 (SC) and decision of Kale Khan Mohammed Hanif Vs. CIT [1963] Bhopal [50 ITR 1]. 16. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal:- Printed from counselvise.com 9 ITA No.5204/Del/2025 1. That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi has grossly erred both in law and, on facts in upholding the determination of income made by the learned Assistant Commissioner of Income Tax Exemption at Rs. 4,22,84,000/- as against declared Nil income in an order of assessment dated 28.12.2019 u/s 143(3) of the Act. 2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding an addition of Rs. 4,22,84,000/- representing the alleged unexplained cash credit under section 68 of the Act read with section 115BBE of the Act. 2.1 That while confirming the above addition, the learned Commissioner of Income Tax (Appeals) has failed to appreciate the factual substratum of the case, statutory provisions of law and as such, addition so confirmed is highly misconceived, totally arbitrary, wholly unjustified and therefore, unsustainable. 2.2 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that the relevant evidence placed on record and drawn factually incorrect and legally unsustainable inferences based on irrelevant and extraneous consideration and thus, addition made is wholly unwarranted and not in accordance with law. 2.3 That the learned Commissioner of Income Tax (Appeals) has Iso failed to appreciate that section 68 of the Act does not apply to a sum already disclosed as gross receipts/income by assessee and undisputedly has been applied for the purpose of education being the purpose of the appellant society. 2.4 That adverse findings recorded by the learned Commissioner of Income Tax (Appeals) are not based on correct appreciation of facts of the appellant society and statutory provisions of law and therefore, untenable. 3 That without prejudice to the above and in the alternative, even otherwise, the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in holding that amount deposited in the bank by the appellant is taxable as income under section 68 of the Act and thereafter computed the demand in accordance with the rates specified in section 115BBE of the Act as amended by Taxation Laws (Second Amendment) Act, 2016. 3.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the amendment made by the Taxation Laws (Second Amendment) Act, 2016 was w.e.f. 1.4.2017 and thus applicable from financial Printed from counselvise.com 10 ITA No.5204/Del/2025 year 2017-18 onwards and not from the financial year 2016-17 relevant to assessment year 2017-18 and therefore, demand computed was not only arbitrary but highly excessive. 3.2 That the learned Commissioner of Income Tax (Appeals) Tax ought to have therefore applied the income tax at best @ 30% of the income determined under section 69A of the Act and not at the rate of 60% as specified in section 115BBE of the Act as amended by Taxation Laws (Second Amendment) Act, 2016, more particularly when no such section has been invoked in the body of the order of assessment u/s 143(3) of the Act. 3.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that substitution of provisions by Taxation Laws (Second Amendment) Act, 2016 w.e.f. 1.4.2017 was not retrospective in nature but was prospective and only application from financial year 2017-18 relevant to assessment year 2018-19. 4 That even otherwise the learned Commissioner of Income Tax (Appeals) passed the order without granting sufficient proper opportunity to the appellant and therefore the same is contrary to principle of natural justice and hence vitiated. 4.1 That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) has failed to appreciate that personal hearing is a mandatory requirement to be satisfied u/s 144B of the Act and non-grant thereof vitiates the assessment and therefore the same is a nullity. Prayer:- It is therefore, prayed that it be held that addition made and upheld by the learned Commissioner of Income Tax (Appeals) be deleted and appeal of the appellant be allowed. 17. At the time of hearing, Ld. AR of the assessee brought to our notice detailed findings of the Assessing Officer and brought to our notice detailed submissions made by the assessee before first appellate authority, he submitted that assessee has made the cash deposits out of fees collected by the assessee. The Assessing Officer has merely analysed the pattern of cash deposits made by the assessee during the assessment year and preceding Printed from counselvise.com 11 ITA No.5204/Del/2025 assessment year. He submitted that Assessing Officer cannot invoke the provisions of Section 68 in the present case and also he submitted that Section 115BBE is not applicable for the present assessment year relying on the decision of Madras High Court in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT Writ Petition [MD No.2078 of 2020 and 1742 of 2020] dated 19.11.2024. 18. On the other hand, ld. DR submitted that the assessee has deposited huge cash during demonetization period and failed miserably to explain such surge in collection of fees. She heavily relied on the findings of the lower authorities. 19. Considered the rival submissions and material placed on record, we observed that assessee has deposited cash of Rs.4,22,84,000/- during demonetization period particularly during 10th November to 16th November 2016. We observed that assessee is a registered society u/s 12AA and continued to get the exemption over the years. Further, we observed that assessee has already disclosed gross receipts in the current assessment year of Rs.19,09,69,323/-. We observed that assessee has disclosed gross receipts in the preceding assessment years as under:- Sr. No. Assessment Year Fees(Rs.) Assessment u/s Cash Other than cash Total i) 2013-14 11,44,39,669 1,59,06,931 13,03,46,600 143(3) ii) 2014-15 6,13,63,845 8,81,67,430 14,95,31,275 143(1) iii) 2015-16 7,55,38,712 8,03,30,515 15,88,69,224 143(1) iv) 2016-17 10,95,86,137 7,67,89,500 18,63,75,637 143(1) v) 2017-18 12,00,43,580 7,09,25,743 19,09,69,323 143(3) Printed from counselvise.com 12 ITA No.5204/Del/2025 20. From the above chart, we observed that assessee has source of cash as well as fees collected other than cash. Assessee has disclosed all the fees collected by them in their bank account and also disclosed the same as gross receipts. It is also fact on record that assessee is a society whose income is exempted from tax on the basis of providing charitable activities towards education. Since the assessee has already disclosed the gross receipts and claimed the deduction u/s 11/12 of the Act, the Assessing Officer again proceeded to make the addition merely on the basis of enquiries and cash deposit during demonetization period particularly, when it is brought to his notice that all the fees/cash deposit during the demonetization period were already disclosed in their books of account and in their return of income filed. 21. We observed that the Hon’ble Jurisdictional High Court in the case of DCIT Exemption Vs. Keshav Social and Charitable Foundation wherein it was held as under:- ………………. 11. Section 68 of the Act has no application to the facts of the case because the assessee had in fact disclosed the donations of Rs. 18,24,200 as its income and it cannot be disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. There was, therefore, full disclosure of income by the assessee and also application of the donations for charitable purposes. It is not in dispute that the objects and activities of the assessee were charitable in nature, since it was duly registered under the provisions of section 12A of the Act. ……………….. Printed from counselvise.com 13 ITA No.5204/Del/2025 22. Further, we noticed that above decision of the Jurisdictional High Court wassustained by Hon’ble Supreme Court in the case of DCIT (Exemption) Vs. Keshav Social & Charitable Foundation 2017 394 ITR 496 (SC) 23. Further the coordinate Bench in the case of ACIT Vs. Sh. Shiv Vankeshawar Educational & Social Welfare Trust [2019] 106 taxmann.com 249 (Delhi Tribunal) wherein it was held:- ………………… 7. We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly the assessee has received a donation of INR 16265000/- from 1038 individuals and Ld CIT (A) has noted that same is credited to the income and expenditure account of the assessee, However Id AO has noted that same is credited as Corpus Donation. During the course of assessment proceedings the assessee produced multiple details with respect to the various donors which establish the identity of those donors. The learned assessing officer on amination of the various details with respect to these donors and stated that there are several infirmities in the details furnished by the assessee, he made an addition of the about some u/s 68 of the income tax act and also applying the provisions of section 115BBC of the act. The learned CITA has categorically recorded a finding that above donation is normal donation which has been offered by the assessee as income. The claim of the AO is that same is a corpus donation. Corpus donation is never credited to the income and expenditure account of the trust whereas the normal donation is credited to the income and expenditure account as income. If a normal donation is doubted by the AO about its genuineness, and identity of the donors, the addition cannot be made u/s 68 of the income tax act in the case of the trust as it has already been offered as an income. The identical issue arose before the Hon'ble Delhi High Court in the director of income tax exemption v. Keshav social & charitable foundation [2005] 146 Taxman 569/278 ITR 152 wherein the Hon'ble High Court held that: '11. Section 68 of the Act has no application to the facts of the case because the assessee had in fact disclosed the donations of Rs. 18,24,200 as its income and it cannot be disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. There was, therefore, full disclosure of income by the assessee and also Printed from counselvise.com 14 ITA No.5204/Del/2025 application of the donations for charitable purposes. It is not in dispute that the objects and activities of the assessee were charitable in nature, since it was duly registered under the provisions of section 12A of the Act. 8. Therefore on reading of the above decision of the honourable Delhi High Court it is clear that when an income credited to the income and expenditure account by the assessee trust then provisions of section 68 does not apply. Honourable High Court recognized that the situation may be different in case of corpus donation. As in the present case the amount of donation as held by the learned CIT - A is normal income already offered by the trust, these fact has never been controverted by the learned departmental representative, respectfully following the decision of the Hon'ble Delhi High Court, we uphold the decision of the learned CITA that the addition u/s 68 of the above donation cannot be made. ……………………. 24. Respectfully, following the above decisions, and the factual matrix in the given case, we are inclined to delete the additions sustained by the Ld. CIT(A). 25. In the result, grounds raised by the assessee are allowed. 26. In the result, appeal filed by the assessee is allowed. 27. Order pronounced in the open court on this day of 25th February, 2026. Sd/- Sd/- (SATBEER SINGH GODARA) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:25.02.2026 *Mittali Sr. PS Copy forwarded to: 1. Appellant 2. Assessee 3. CIT Printed from counselvise.com 15 ITA No.5204/Del/2025 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "